In Ohio, Poor People Pay More Of Their Incomes In Taxes Than Rich People
A national report by the Institute on Taxation and Economic Policy ranks Ohio 18th in the country for most imbalanced tax systems. In a “regressive” tax system, low- and middle-income people pay a larger balance of their incomes in state and local taxes than high earners. The study finds very few states with “progressive” tax systems, and ranks Washington, Florida, Texas, South Dakota and Illinois as the top five for regressive systems.
In Ohio, the lowest 20 percent of earners pay an average of 11.7 percent of their incomes in taxes, and the next 60 percent pay around ten percent of their incomes. The top one percent of earners pay around half that, 5.5 percent.
The type of taxation matters, it says: Sales taxes, and excise taxes on goods like gasoline and cigarettes, can add up to a much larger piece of the pie for someone who’s not making much money. Lower-income people are also likely to pay a bigger portion of their earnings in property taxes. The type of taxation that asks the wealthy to pay more is typically income tax, and many income tax systems, including Ohio’s, are progressive. So, the rich pay almost four times the percentage of the poor in income taxes in the state.
Progressive think tank Policy Matters Ohio, which released the report here, says inequality is growing in the state: last year Ohio cut income taxes across the board, while raising sales tax. Policy Matters also argues that shifting state tax burdens to local tax levies tends to over-charge lower-income people. Both agencies warn that as income inequality continues or expands in the U.S., regressive tax systems may lead to continually underfunded state and local resources.
Lewis Wallace is WYSO's managing editor, substitute host and economics reporter. Follow him @lewispants.